|
Every Section 1031 Exchange transaction is different. Always consult a qualified intermediary, attorney or tax advisor to determine how an exchange may best be structured to meet your objectives.
WHAT IS A TAX-DEFERRED EXCHANGE?
A Section 1031 Exchange is a method by which a property owner trades a property for replacement proper of “like-kind,” while deferring the payment of federal income taxes and some state taxes on the transaction.
WHAT ARE THE BENEFITS OF EXCHANGING VERSUS SELLING?
A 1031 exchange allows you to postpone taxes due on a sale of qualifying properties, which means more money is available to invest in another property.
Any gain from depreciation recapture is postponed.
WHAT ARE THE GENERAL GUIDELINES TO FOLLOW?
The value, equity and debt on the replacement property must be equal to or greater than the value, equity and debt of the relinquished property.
All of the net proceeds from the sale of the relinquished property must be used to acquire the replacement property.
WHAT IS A QUALIFIED INTERMEDIARY AND WHY IS ONE NEEDED?
A QI is an independent party who facilitates the transaction to prevent the taxpayer from having actual or constructive receipt of the funds.
WHAT ARE THE TIME RESTRICTIONS ON COMPLETING A 1031 EXCHANGE:
A Taxpayer has 45 days to identify potential replacement properties. The entire exchange must be completed within 180 days.
Source: the Federation of Exchange Accommodators, www.1031.org. |
